Dr Pepper – 7up, Inc. – Squirt Case

Dr Pepper/7Up, Inc Squirt® Brand The brand manager of Squirt, Kate Cox has been tasked with coming up with the brand’s annual advertising campaign. Kate met with the brand’s advertising agency to discuss some ideas for new market targeting, and product positioning because Squirt’s recent case sales volume has fallen, as well as increased competition, and a change in many of the markets that Squirt currently serves. Currently Squirt’s total market by ethnicity shows that 73% of its market is Caucasian, 15% African-American, and the remaining 12% are Hispanic.

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One of the major problems with declining sales is the increase of Hispanic communities in markets that were previously popular markets for Squirt. So what does Squirt need to do to turn this around? The problem facing Squirt is how they can effectively position their brand to increase sales as well as capture the Hispanic consumer market without spreading their advertising dollars too thin. Carbonated Soft Drink Industry The Carbonated Soft Drink (CSD) industry is enormous. In 2000, more Americans drank soft drinks than water.

The production and distribution of soft drinks involve concentrate producers (basic flavors), bottlers (add sweetener and carbonated water), and retailers. Of all the retailers available for distribution to customers, grocery stores and supermarkets account for about 31% of sales. There are three major competitors in the soft drink market (Coca-Cola, 44. 1%; Pepsi-Cola, 31. 4%; Dr Pepper/Seven Up, 14. 7%). Each competitor spends a lot of money on advertising their brand through promotions, and consumer price discounting.

Concentrate producers and bottlers usually share advertising costs because bottlers can target markets locally while producers focus on the bigger picture. While colas are still the most popular in the CSD Industry, they are starting to lose ground. Flavored soft drinks are beginning to become more popular due to the changes in the U. S. population make-up (30% increase in sales from 1990-2000). Most CSD consumers are aged 20-49. Of these consumers, the majority of CSD consumers are teenagers or young adults ages 12-24.

Also, Hispanics and African-Americans make up the majority of ethnic or racial groups that consume CSD’s. These populations often favor flavored beverages over colas. According to an article provided in the case, within the next ten years the Hispanic youth will become the largest youth population (22% increase), while the population of white youth will decrease by 5%. Squirt Brand The Squirt brand was born in 1938 in Phoenix, Arizona. It is known for its light and refreshing taste and low sugar content. The owner, Herb Bishop, sold Squirt to Brooks Products, a bottler.

Brooks Products changed the formula, logo, and repositioned the brand as a mainstream soft drink. Brooks Products also introduced Diet Squirt, which was the first soft drink in the U. S. to be sweetened with Aspartame. Squirt was eventually acquired by Cadbury Schweppes PLC who assigned it to their Dr Pepper/Seven Up division in 1995. Squirt does not spend as much as their competitor’s on media advertising, but instead spend more on retail, trade, and consumer promotions, as well as cooperative advertising arrangements. Currently Squirt has the highest customer awareness among their competitors.

Since the name has been around since 1938 a wider range of consumers are aware of the brand. Squirt’s target market is adults ages 18-34, and they positioned themselves in such a way as to target individuals that are fun-loving and individualistic. When reviewing their current media advertising campaign, many focus groups thought that their television commercials and advertisements were juvenile. Advertising Agency Recommendations The brand manager of Squirt, Kate Cox worked with the companies advertising agency, Foot, Cone & Belding to come up with an updated positioning strategy , and target market.

After a review of the current Grapefruit and Citrus Brands market, and the total market breakdown by racial/ethnic groups & age, the group decided it was best to market to multicultural 18-24 year olds. Specifically their advertising would focus on the 21-24 age group because those are adults who are all about the ‘work hard, play hard’ philosophy. Opportunity to Expand into the Hispanic Market While Kate agreed with the advertising company’s new position and target market, she would also like to reach out to the Hispanic & African-American customers.

The 2000 U. S. Census showed that the Hispanic population had increased by 57. 9% since the 1990 census. This is compared to only an increase of 13. 2% increase in the total U. S. population. 75% of Hispanics live in the western and southern portions of the United States (with over half living in just California and Texas). 30% of Squirt is bottled in Los Angeles (46. 5% Hispanic population), and California represented 38% of overall case volume in 2000. Over 35% of the Hispanic population in 2000 was under the age of 18, and the median age is 25.

About 55. 4% of the Hispanic population would prefer to hear their ads in Spanish, and they are very brand conscious. Hispanics prefer marketing approaches that are real, and authentic and often shop at local grocery outlets and mom-and –pop shops. To further focus on the Hispanic population, Squirt may need to modify their advertising efforts. SWOT ANALYSIS STRENGTHS Squirt has many internal strengths. The first being part of Dr. Pepper/Seven Up. Dr. Pepper/Seven Up combines to be one of the largest non-cola soft drink enterprises in North America.

They also combine to be the third largest soft drink company in the United States. They also enjoy a top ten market share in the soft drink market. Squirt reaches out to a broad spectrum of consumers with 85% market coverage. Focusing more on Squirt, they have the highest consumer brand awareness among carbonated grapefruit soft drinks in the United States. Based on consumer research, Squirt scored higher than the competition on thirst quenching attributes. Research also indicated that Squirt advertising effectively communicated the fun and thirst-quenching method.

This is important because that is a part of the focus of the Squirt advertising strategy. WEAKNESSES While Squirt does have many strengths, internal weaknesses also exist. Two thirds of Squirt bottlers were affiliated with Coca-Cola Enterprises and Pepsi Bottling Group. This is very important considering Squirt is relying directly on their competition’s bottling group to bottle their product. This could have a direct effect on costs and lead time deficiencies. Another weakness is a lack of a bottler in the New York City metropolitan area.

Lacking a bottler in one of the largest metropolitan areas in the United States could prohibit Squirt from effectively reaching consumers. Research indicated that Squirt’s marketing scheme and strategy was considered to be juvenile to both younger and older demographics and were also not meeting their current lifestyle. Squirt was not advertising correctly to the main soft drink consumer age groups and possibly not appealing to many of them. A final weakness would be that Squirt has a very large prominence in Mexico. It is one of the most popular soft drinks.

Similar to the New York weakness, Squirt is very popular in Mexico, but it is not sold by Dr. Pepper/ Seven Up. OPPORTUNITIES There are many opportunities that Squirt can take advantage of to improve their position in the soft drink market. One of the opportunities is the growing trend of US consumers drinking habits. US consumers drink more carbonated soft drinks than they drink tap water. There is also a growing trend of US consumers drinking more non-cola products. Also, there is increasing relevancy with a younger target market.

The main focus is on the twenty-one to twenty-four year old life stage which is marked by the straddling of adult responsibilities and more carefree times. This group likes to work hard and play harder. This group too has high soft drink consumption and also favors non-cola. A strong opportunity for Squirt is the Hispanic market. More than 75% of Hispanics live in the western and southern United States. The Hispanic market is relatively youthful. The median age is twenty-five compared to the US median age of thirty-five. This lends into the Squirt strategy of marketing to the younger target market.

Another opportunity is the soft drink market in Mexico. Mexico is the second largest carbonated soft drink market and Squirt is the eighth largest brand in Mexico. Currently Squirt is not sold and marketed by Dr. Pepper/Seven Up in Mexico however. They are owned and marketed by Refremex AG. This could be an opportunity to take over the sales and marketing efforts and boost sales in the Mexico soft drink market. THREATS There are also external factors that could threaten and prohibit the growth of Squirt. Squirt’s largest competition threat comes from Coca-Cola and Pepsi.

Both Coca-Cola and Pepsi-Cola launched non-cola soft drinks. Coca-Cola’s Fresca offers a caffeine free, diet non-cola grapefruit soft drink that appeals to those above thirty years of age. Coca-Cola also introduced Citra a sugared counterpart to Fresca in 1997 in southeastern and southwestern United States with marketing towards Spanish speaking markets. It was targeted at teens and young adults. In 1999 it was made available to 95% of the United States bottler markets. Squirt also has competition with Coca-Cola brands, Mello Yello and Surge, Pepsi-Cola’s Mountain Dew, and Sundrop marketed by Dr. Pepper/Seven Up.

All four contain caffeine and are of the citrus variety. SWOT SUMMARY AND STRATEGIC POSITION Squirt has been able to reach out to their consumers and have 85% market coverage and also has the highest consumer brand awareness among carbonated grapefruit soft drinks in the United States. Squirt however lacks a bottler in the large metropolitan area of New York. Also, research indicated that Squirt’s marketing scheme was out of touch and considered juvenile. Squirt also has a weak bottling market and relies on their competition, Coca-Cola Enterprises and Pepsi Bottling group to complete the bottling process for them.

One of the external opportunities Squirt has is appealing to the younger, work hard, play harder market. With offering a refreshing soft drink, Squirt has an opportunity to grow in that market segment. The Hispanic market is growing and there is a large soft drink consumption rate associated with the Hispanic market. Also Squirt can evaluate the current sales in Mexico and take responsibility of sales and marketing which it currently lacks. Squirt’s largest threats come from the competition of Coca-Cola’s Fresca, Citra, Mello Yello, and Surge. The threat of Pepsi-Cola’s Mountain Dew and Dr.

Pepper/Seven Up’s Sundrop is also strong. They offer non-cola, citrus, some caffeine, and some containing sugar. They all appeal to different groups seeking different benefits that Squirt may not be able to offer. ALTERNATIVE MARKETING PLANS There are 3 different marketing strategies that are being offered: 1. Target the Hispanic and African American markets between ages 19-24 by using cool and hip advertisements (FCB Recommendation) 2. Partner with local mom-and-pop stores, convenience stores, and bodegas in targeted Hispanic communities to offer promotions and advertisements of the Squirt brand. . Do nothing FCB Recommendations The FCB recommends that Squirt begin to target the Hispanic and African American markets between the ages of 19-24 through marketing the product as young and hip without being juvenile. To change the target market of the brand, it would most likely have to engage in some type of large scale media campaign. This strategy can potentially open up a large and ever growing market segment in the soda industry. However, this type of campaign can be very expensive. Currently, Squirt only spends about $700,000 dollars on advertising each year. 704. 1/57,439. 2=1. % of sales is spent on media advertising. This number is dwarfed by the $50 Million that was spent by Mountain Dew. Mountain Dew currently is the leader in the market of 19-34 year olds. Squirt should not try to compete with Mountain Dew directly for two reasons: 1) because people have already formed their brand preferences between the ages of 12-24, and 2) Squirt is a non-caffeinated, grapefruit drink that is too different from Mountain Dew to compete with. In addition, by changing their marketing focus, they could lose the 1-12 and the 40-60 markets that they currently do very well in.

Therefore, we do not recommend this marketing strategy for the Squirt brand. Partner with local stores The research shows that most Hispanics shop at local mom-and-pop stores, convenience stores, and bodegas. This gives Squirt the opportunity to target the Hispanic market efficiently by offering promotions and putting advertisements into community stores that have a high Hispanic areas. The advertisements would be culturally specific, and most would be in Spanish, as the majority of the Hispanic population prefers to see ads in Spanish as opposed to English.

This is a good strategy because the targeted marketing does not conflict with the current marketing strategy, since the advertisements are localized. In addition, it hits the shopper’s right where they shop, and the promotions get them to recognize the products. Squirt is already a well-known brand in Mexico, which is where most Hispanics are from. Therefore, Squirt could capitalize on name recognition and familiarity by duplicating advertisements that they may have seen in their home country. This strategy also broadens the ages that are targeted to 18-34.

This is a very large potential market, around 23 Million (65% * 35,300,000=22,945,000). Hispanics may possibly make up the new target segment And also works to maintain age groups it is already doing well in. Do Nothing FCB’s third and final recommendation is to continue with their current strategy which heavily focuses on the Caucasian population which has been their strongest demographic for decades. Following this image they would concentrate at marketing Squirt as a thirst-quenching as opposed to being cool, young and hip.

This leaves Squirt aiming at a mill of the run market without a strong definition of which age group they are aiming for and closed off from new emerging markets. Squirts market share is secure in that it hasn’t declined but has not seen a strong rise in sales and growth in new markets. The Caucasian population supplies a large share of its sales, though with Squirts strong presence in California this could change as the demographic of California has been shifting exponentially to have a higher Hispanic population which may not prove to be suitable for Squirt’s current business model if they are not able to appeal that growing minority.

Recommendation & Implementation The soft drink market is highly segmented in catering to particular tastes, image and lifestyles. Many factors must be considered in making a recommendation in regards which direction to market Squirt to the general public. The factors that come into play most often are the consideration of the target demographics’ age, language and cultural influences that help differentiate which product each segment will buy. FCB’s purpose is to find he optimal solution in helping increase Squirt’s market share by finding new markets and groups or exploiting markets that are currently stagnant. My recommendation is to approach the market with a multi-cultural marketing scheme, to push the product towards ethnic minorities such as Hispanics. Squirts popularity and sales has not increased in margin, and much of that can be attributed to the rise in certain populations which has affected the market Squirt had once catered to which helps define the stagnant sales of Squirt.

Steady yet unmoving sales do not pose a problem currently, but the lack of sales growth could be a sign of coming product decline as market image and popularity could fall into decline. With that in mind it is important for FCB to position Squirt as a thirst quencher for ethnic minorities. In repositioning Squirt to cater to different markets it would be important to take notice of buyer habits that the Squirt product is aimed to cater to, in the case of Hispanics it’d be important to pay attention to their shopping habits and what is marketable and popular in their tastes.

Often they prefer to shop closer to home at local places, such us close by convenient marts and Bodegas and even those that are locally owned by other Hispanic minorities. A strong sense of community exists that can help perpetuate the product if made available to local places and advertised on a local level by making sure to build ties with the local community and shop owners. The strongest point in helping position Squirt towards a new market is to concentrate on the advertising aspect as a huge initiative in helping Squirt reach new markets and reinforce customer sentiment.

Creating an emotional and cultural connection with the brand is the most effective sell for Hispanics, as most are not sold on a strong sell but prefer to be bought of on a genuine link to their heritage. This form of advertising can be executed by creating commercials and posters that are concentrated on a genuine interest in thirst quenching while focused on a particular cultures history as opposed to the extreme ads that have been linked to catchy tunes and extreme individuals on screen.

The focus of Squirt’s target age group should be the 18-24 age range, because the Hispanic population has the largest youthful age group of any demographic, and if FCB plans to advice Squirt to target Hispanic’s it would be an optimal decision to concentrate on their largest age group which has a median of 24. 2 years of age. Aiming at such an age group also help solidifies future buyers, as an individual develops their palette between 13-24 years of age. Their current marketing scheme can maintain parts of its edgy image but incorporate the culture and life styles reminiscent to Hispanic youths and younger adults.

It can be marketed as refreshing, thirst quenching and a take on freedom for the current demographic yet still positioned as a young adult refreshing drink. There should also be heavy consideration placed into advertising in specific languages for the Hispanic market, as 55. 4 percent of Hispanics prefer to hear ads in Spanish with only 13. 2 percent being indifferent. Segmenting that 68. 6% of the market would be a viable option to seeing Squirt advertising in their native tongue to help secure customer interest loyalty.

Squirt’s concentration should be on Texas and Southern California as more than 75 percent of the Hispanic population lives in western and southern United States. In terms of advertising and heavy sales these seem to be Squirts market weakness, which could be explained by the increase of Hispanic population in the US, as there has been a stagnation and signs of decline in Squirt’s popularity as while the Hispanic population has grown its important to note that 73% of all Squirt’s U.

S. market is Caucasian. The foreseeable outcome in the future is that Hispanic populations are still on the rise and they are a huge market for Citrus flavored beverages. In marketing to these sects based on their respective options there will be a growth in sales for Squirt by focusing on television advertisements and Hispanic magazine full page ads that are fully in Spanish.

Facing other opinions of continuing to stick with current market strategies for Squirt might prove to be difficult to help with product growth, as the population of the United States is changing drastically and in specific in the Southern and Western parts of the United States and it becomes for any current product to cater to these new markets using a new business module, new methods of distribution and even allocation different advertising based on the markets language, preferences and cultural background. Citation Kerin, Roger A. , & Peterson, Robert A. (2010). Strategic Marketing Problems: Cases and Comments. Prentice Hall.

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